Feds defend approval of telecom megamergers

In court filing, the Justice Department tries to fend off criticism of analysis approving mergers between AT&T and SBC and Verizon and MCI.

The U.S. Justice Department on Thursday denied allegations that it fudged the analysis that prompted it to approve two telecommunications megamergers now under scrutiny by a federal judge.

In a Thursday filing with U.S. District Judge Emmet Sullivan in Washington, D.C., Department of Justice lawyers took issue with accusations of wrongdoing lodged by opponents of the twin deals--between AT&T and SBC Communications, and Verizon and MCI--at a November 30 court hearing. The public version of Thursday's document was redacted.

Sullivan had given the Justice Department the opportunity to respond to a lengthy presentation by Silicon Valley attorney Gary Reback on behalf of the Alliance for Competition in Telecommunications, a group formed to oppose the deals. Reback accused the Justice Department of making up facts and ignoring critical considerations while analyzing the competitive impact of the deals.

In its court filing, the Justice Department continued to defend its analysis, arguing that the allegations were "based on mischaracterizations of relevant legal standards, misstatements of United States' positions, and misrepresentations of the factual record."

When approving the mergers, the Justice Department concluded that it needed to place limited conditions--namely, requirements aimed at ensuring that the companies' competitors could gain access to fiber-optic connections in certain commercial buildings where Verizon and MCI or AT&T and SBC had been the only two companies supplying some types of connections.

Reback had argued that the antitrust analysis should have considered situations in which three competitors became just two, or even those in which four competitors were whittled down to three by the melding of the companies.

The Justice Department's filing represents the Justice Department's latest attempt to persuade Judge Sullivan that he should sign off on the deals. Since the summer, Sullivan has been pressuring the government to provide additional information about why it believes the mergers satisfy the "public interest."

A 1974 federal antitrust law called the Tunney Act calls for a court to vet agreements negotiated between the Justice Department and the companies involved to ensure the deals meet that standard. Congress recently amended the law to give judges even greater latitude in reviewing cases.

At the latest hearing involving attorneys for the government, the telephone companies and outside interest groups, attorneys for Verizon and AT&T said they were convinced that the Justice Department's conditions erased any possible antitrust concerns. Sullivan, however, said he did not plan to "rubber stamp" the deals and left no indication as to when he might arrive at a decision.

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